A shortage of offshore rigs may force Chevron Corp. and its partners to delay work on the deepwater Jack prospect in the Gulf of Mexico (GOM) until later this year or until early 2008, the company said Wednesday.

Chevron, a 50% stakeholder in Jack, along with partners Devon Energy Corp. and Statoil ASA, which each hold a 25% stake, announced completion of the deepest extended drill stem test in history with the successful production test on the Jack No. 2 well at Walker Ridge Block 758 last year (see Daily GPI, Sept. 6, 2006). The Jack well was completed and tested in 7,000 feet of water and more than 20,000 feet under the sea floor.

Only a few rigs operate in waters deeper than 7,000 feet, and Chevron had to pull the rig that had been there to complete another well. It had planned to have a rig back to the Jack prospect by July, but the rig shortage will cause a delay.

Because of a "very tight market" for deepwater rigs, "we absolutely won't start up at Jack this summer," Chevron spokesman Mickey Driver told reporters in Houston.

Less than 40 drillships now are able to operate in the deepest waters and there are about 50 now under construction because the deepwater market is growing.

In a note, Deutsche Bank analyst Jennifer Gordon said a trend is emerging in the Gulf of Mexico, with producers unable to drill prospects because of the lack of drilling rigs. She said recent data indicate that in the past 12 months, "only an estimated 400 million barrels of oil equivalent [boe] has been discovered in the deepwater -- the majority of that attributed to Jack...This compares to 1.7 billion boe in the preceding 12 months (June 05-May 06). The market is not paying attention here and should be -- U.S. oil production is spiraling down."

Devon already is scheduled to test a prospect at the deepwater Chuck field with the Ocean Endeavor rig, which it has under long-term contract. Devon owns the Chuck field with ExxonMobil Corp. and ConocoPhillips. Devon then plans to drill another test at the Jack prospect with the rig, and following the test, the rig is to be moved for more drilling at the deepwater Cascade prospect. The wells are each expected to cost around $100 million and each will take up to four months to drill.

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